New view on daily deals

Looterang sets itself apart by providing targeted discounts

It was part entrepreneurship and partly an effort to save some face that inspired college buddies Ben Huston and Ernie Garcia Jr. to create Looterang, their alternative to the mainstream daily-deal programs that offer gift certificates or vouchers from retailers at a discount.

More than a year ago, the native Phoenicians noticed the craze surrounding these websites, such as Groupon and Living Social, but felt there were two shortcomings: The websites knew little about the preferences of their customers, and having to print and present a paper coupon or show servers the discount code from their smartphones could be embarrassing.

"It's not appealing. If I'm on a date, I don't want to look cheap," said Huston, whose sentiments reflected his and Garcia's personal experiences as well as those of their friends.

"We saw that with our peers. Not a lot of them make a ton of money, and they don't mind saving, but they didn't want to look cheap," he said.

Huston, a former lawyer, and Garcia, a former investment banker, came up with Looterang's model that aimed to sidestep these issues and launched their company in January 2011. Looterang started by being accessible only by computer, but launched a mobile application last November.

Consumers register their credit or debit cards with Looterang and then receive notification of deals from merchants that suit their tastes and geographical locations.

Looterang uses a formula that tracks and analyzes spending patterns associated with the registered card and determines what offers to send each consumer. He or she has the option to activate the deal via their computer or smartphone and, if activated, the discount is automatically applied when Looterang refunds the discount value to the credit or debit card after purchase.

Looterang uses a third party that has an encryption-based security system equivalent to bank-security standards, Garcia said.

Some staff members are solely dedicated to researching consumers' spending patterns to determine which deals to send, Huston said.

This results in consumers receiving fewer random offers that may not interest them, having the flexibility to activate deals on the go without prepaying and avoiding the need to whip out a coupon, Huston said.

"We're targeting people that are out right now, spontaneous and very much on the go. If you're in your car, you don't have to worry about paying ahead or printing out a coupon," he said.

Looterang has 3,000 users and 150 partnering merchants, mostly in Tempe, Scottsdale and Phoenix. There are plans to expand into Tucson and perhaps go national a few years down the road.

The average Looterang consumer uses the site on a weekly basis, while other daily-deal participants use those sites every seven months, Huston said.

"We do a lot of the legwork for them," he said.

The main criticism of traditional daily-deal programs mostly comes from business owners, who claim the deals attract the one-time customer but do little in creating a regular patron.

Looterang's platform helps eliminate that because the discounts are offered at places consumers tend to visit anyway, Garcia said. Some discounts may be lower than the 50 to 90 percent discount seen at the mainstream websites, but it's enough to make both sides happy.

"Looterang is specifically designed to avoid that criticism because that criticism is valid. You might save less money, but you are going to have a lot more restaurants willing to give that discount. This leads to lasting relationships," Garcia said.

Justin Cohen, director of operations at El Hefe Super Macho Taqueria in Scottsdale, has been both partner and client since last fall. Cohen agreed to partner with Looterang when seeking marketing options for his restaurant and bar and sought an alternative to the daily-deal sites he had used.

He liked the process so much that he personally signed up for it. At El Hefe, Cohen said there has been a 10 percent increase in Looterang customers vs. those that do not use Looterang.

"I disliked people having to hand in some kind of paper, but here, there's not a real conversation needed about the discount coming. That's really important," Cohen said.

Part of the service includes tracking how much Looterang customers are spending and providing the data to merchants. The average purchase by a Looterang customer at El Hefe is nearly $10 more than the average purchase made by non-Looterang users, according to Looterang data.

Huston and Garcia met while attending Stanford University. They came up with the idea and decided to leave their day jobs and turn the concept into reality.

They returned home and based their idea around merchants they knew well and with whom they had personal experience. They traveled around the country seeking funding and meeting with potential investors, including many who were surprised to meet technology and software entrepreneurs from Arizona not Silicon Valley.

And that's just fine with them.

"They call us 'the Arizona guys,'" Huston said. "Most companies that want to do this don't start in Arizona, but we thought, 'Let's be bold and build it here using the good network of Arizona merchants.' This decision was intentional."

Looterang

Where: 7272 E. Indian School Road, Suite 102, Scottsdale.

Employees: 15.

Interesting fact: 54 percent of consumers from households earning at least $150,000 a year subscribe to e-mails sent by daily-deal operators, according to consulting firm Accenture Ltd.